Large Venture-Capital Funds Piling Up in Silicon Valley

Eliot Brown reported last week at The Wall Street Journal Online that, “Giant venture-capital funds are piling up in Silicon Valley, a sign that foundations, pension funds and endowments are still willing to rush money into the risky startup sector despite lingering concerns about overheated valuations.

“The latest firm to raise a jumbo-size fund is Canaan Partners, a fixture on the venture-capital scene that collected $800 million for new investments in tech and health-care startups. Canaan’s 11th fund is the largest in its 30-year history, up from $675 million three years ago, it says.

“Canaan’s new war chest furthers a trend since early last year of venture funds ballooning to levels not seen since the dot-com boom. The influx of capital has helped startups stay private longer with money that in past eras would have been raised on the public markets.”

The Journal article noted that, “Last year, U.S. venture firms raised 30 funds totaling at least $500 million each, according to Dow Jones VentureSource. That is up from 17 in 2015 and is by far the most in a year since 2000 when there was 54.

“Through the first half of this year, there were eight such megafunds recorded by VentureSource that collected a total of $9.3 billion, which represented about half of the entire sum of capital raised by 302 venture-capital funds. The median fund size is generally around $100 million.

“Fund managers raising outsize funds over the past year include venerable firms such as New Enterprise Associates and Technology Crossover Ventures, which raised $3.3 billion and $2.5 billion, respectively, both their largest to date.”

Mr. Brown added that, “The influx of money from so-called limited partners—the foundations, pension funds, endowments and other big money managers that invest in venture capital—suggests investors hope the startup frenzy of recent years will march on.”

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